ABUJA — THE Debt Management Office (DMO), has turned down, requests from state governments urging the organisation to grant them relief in the deductions of their monthly allocations from Federation Account. The states are arguing that they would use the money to service debt.
Exchanging views with representatives of the second tier governments in Abuja, yesterday, the Director-General (D-G) of the DMO, Dr. Mansur Muhtar disclosed that the Federal Government was itself in a strait as it was faced with a dilemma of sustaining its share of the overall debt servicing obligations.
The dilemma, he said stemmed from the fact that some governors secured a form of relief from the Federal Government before the last general elections which made the Federal Government to increase its obligation on external debt servicing from the original 75 per cent to 85 per cent.
“That arrangement increased the burden of the Federal Government from 75 to 85 per cent in order to create additional resources for the affected states. This has put us in a dilemma as the D-G Budget has said he will not increase provision for debt servicing,” Dr. Muhtar said.
The DMO who was reacting to requests by the states to have some relief from the monthly deductions, said that even the states which enjoyed the relief from the Federal Government had to return to status-quo, as according to him, “the arrangement did not in any way, mean a reduction in their debt profile. They still have to pay their debts.
Dr. Mansur described as “messy” the nation’s debt burden incurred through loan arrangements that were far from ideal and which uses were in doubt. He said that in some cases, loans were signed by government officials other than the Commissioner of Finance, in the states and that some of the projects could not be traced.
The D-G said that nothing was wrong in borrowing in itself if one could source cheap funds but insisted that such loans must be put to good use, a situation he observed was the case with China and India.
“Basically, nothing is wrong with borrowing. The issue is how judiciously do you put it to use. If you have cheap loans why not. For in stance, the IDA (International Development Agency) facilities which are cheap are there for those who qualify. And honestly, there are so many interests out there after those fund. If you don’’t take it , someone else will take it. That it the case with China but over there, they put their facilities to good use. Go to China and see what they have done with their loans.
Earlier, representatives of the states, drawn mainly from among Commissioners and Permanent Secretaries of Finance Ministries, said they wanted to be involved in the negotiations of foreign loans and requested the DMO to prepare details of deductions so far made from their allocations, in respect of debt servicing.
It was agreed that states that had queries on the sizes and their shares of the foreign debt should forward same to the DMO for specific attention.
